The $603 million Delaware fund recently received the U.S. Lipper
2014 Excellence in Fund Management award. It swept Lipper's 3-year,
5-year and 10-year categories for corporate debt BBB-rated funds.

The fund has been the top dog in a field with some big stars,
including Dan Fuss, whose track record at Loomis Sayles has earned
him the nickname "The Buffett of Bonds."

"The fixed income team at Delaware has done an outstanding job
delivering top performance in a field crowded with talent," said
Jeff Tjornehoj, head of Lipper Americas Research. He also cited Mark
Kiesel at Pimco as a tough competitor.

Tjornehoj said the Delaware fund dives into longer maturities and
emerges with terrific results.

"Relative to many of its peers, it's not the smoothest ride for
investors," Tjornehoj said. "But over the long run, they've actually
delivered less volatility than the fund's benchmark while still
beating it substantially by almost two percentage points per year
over the last ten years."

The Delaware fund can also be contrarian, not unlike a stock picker
who looks for value in places that other investors flee, said Tom
Chow, senior vice president and chief investment officer of
corporate credit at Delaware Investments. The company is part of
Macquarie Group Ltd.

"We know what's in the benchmark. But we don't just invest in names
in the benchmark. We do our own homework," Chow said.

In the fiscal year ended July 31, the fund had plenty of exposure to
Europe, despite its instability. The fund benefited from investments
in Spanish telecommunications provider Telefonica and Italian
wireless operator Wind Telecom as it focused on industries with
defensive credit characteristics, such as steady cash flow.

"Credit markets are a fascinating place," Chow said. "There are all
shades of colors, rather than black and white. It's what keeps
things interesting."

The fund's average annual return over the past 10 years was 8.3
percent as of March 25, easily beating the 5.15 percent return on
the Barclays Long U.S. Corporate Index. The fund's net expense ratio
is 0.96 percent on an annual basis.

As an investor in corporate debt, the fund looks for stability and
consistency, Chow said.

"We don't necessarily need growth for the company to meet their
obligations to us," Chow said.

The fund says it takes a bond-by-bond approach to find undervalued
issuers but stays away from debt with unattractive risk-return
profiles.

Over the past year, the fund saw strength in the financial sector.
Bonds of U.K.-based bank Lloyds TSB Bank Plc and U.S. insurance
companies American International Group Inc and MetLife Inc helped
lift the fund's performance. Another U.S. insurance provider,
Prudential Financial Inc, also boosted the fund's results, according
to disclosures to investors.

The fund is supported by what Chow describes as a flat organization
of 85 people. Portfolio managers, traders and researchers work
together constantly to protect the fund from being whipsawed by
risk.

They have conversations about bond credit quality daily, if not
hourly, Chow said.

As the U.S. economy stabilizes, Chow has been watching how some
corporate management teams become more preferential toward stock
investors versus debtholders. Examples include borrowing money at
historically low interest rates to repurchase company stock or for
corporate takeovers.

Those kinds of moves can boost shareholder value and won't likely
become a problem for debtholders in A-rated companies, even if the
economy sours or operations encounter headwinds. But companies with
higher leverage and less resources may not be as resilient, Chow
said.

"If operations slow down, you generate less cash. That can turn into
a problem for bondholders," he said.

During the 2013 fiscal year, the fund was hurt by exposure to
Barrick Gold Corp, the world's biggest gold miner. A 28 percent dive
in bullion prices caught producers by surprise, putting balance
sheets under stress.

Delaware bond funds, including the extended duration fund,
sidestepped some of Barrick's problems by being nimble.

"We actively managed the funds' positions in these holdings,
periodically increasing the funds' exposure at lower prices while
reducing the funds' allocations as the securities began to recover,"
Delaware Investments said in its annual report to bond fund
investors.

(Reporting by Tim McLaughlin; editing by Lauren Young and Jeffrey Benkoe)